This is a long read, but when public companies file 10Ks, there is a section titled 'Risk Factors' where they are required to disclose any and all factors they may adversely affect their business.
Having read thousands of these disclosure statements, most of them are very generic in nature. But in looking at the following 10K disclosure from a mere 12 months ago at he 2008 10K filing, just think of how far they have come.
This is about the time MMs and shorts tried to drive them down to cellar-box status and eventually out of business, and why I firmly believe they are about to pay them back their just desserts...again, a long read but worth understanding the quantum leaps taken over the course of the past 12 months.
"RISK FACTORS
Our business involves a high degree of risk. Any of the following risks could materially and adversely affect our business, financial condition, and results of operations. This could cause the trading price of our common stock to decline, with the loss of part or all of an investment in our common stock.
Risks relating to our Business
We have a limited history of profitability which may not continue.
While we had net income of $1.244,455 for the fiscal year ended May 31, 2008, we incurred a net loss of $817,217 for the fiscal year ended May 31, 2006. There can be no assurance that we will sustain profitability or generate positive cash flow from operating activities in the future. If we cannot achieve operating profitability or positive cash flow from operating activities, we may not be able to meet our working capital requirements. If we are unable to meet our working capital requirements, we may need to reduce or cease all or part of our operations.
Our resources may not be sufficient to manage our expected growth; failure to properly manage our potential growth would be detrimental to our business.
We may fail to adequately manage our anticipated future growth. Any growth in our operations will place a significant strain on our administrative, financial and operational resources, and increase demands on our management and on our operational and administrative systems, controls and other resources. We cannot assure you that our existing personnel, systems, procedures or controls will be adequate to support our operations in the future or that we will be able to successfully implement appropriate measures consistent with our growth strategy. As part of this growth, we may have to implement new operational and financial systems, procedures and controls to expand, train and manage our employee base, and maintain close coordination among our technical, accounting, finance, marketing, sales and editorial staff. We cannot guarantee that we will be able to do so, or that if we are able to do so, we will be able to effectively integrate them into our existing staff and systems. To the extent we acquire other businesses, we will also need to integrate and assimilate new operations, technologies and personnel. If we are unable to manage growth effectively, such as if our sales and marketing efforts exceed our capacity to deliver our products or if new employees are unable to achieve performance levels, our business, operating results and financial condition could be materially adversely affected.
We derive a significant portion of our revenues from a limited number of customers, the loss of which would significantly reduce our revenues.
We have derived, and believe that we will continue to derive, a significant portion of our revenues from a limited number of customers. To the extent that any significant customer purchases less of our products or terminates its relationship with us, our revenues could decline significantly. As a result, the loss of any significant customer could seriously harm our business. For the fiscal year ended May 31, 2008, we had three separate customers which accounted for 31.6%, 29.3% and 9.7% of our revenues. For the fiscal year ended May 31, 2003, we had one customer which accounted for 75% of our revenues. Other than under existing contractual obligations, none of our customers is obligated to purchase additional products from us. As a result, the volume of sales that we make to a specific customer is likely to vary from period to period, and a significant customer in one period may not purchase our products in a subsequent period.
We have historically been dependent on a single manufacturing source for our products.
We have historically depended primarily on one manufacturer for the production of our products. If our manufacturer experiences any significant disruption in the operation of the manufacturing facility or a serious failure of a critical piece of equipment, we may be unable to supply products to our customers. However, we try to maintain product inventory to fill the requirements under such circumstances. Interruptions in manufacturing of our products could be caused by manufacturing equipment problems, the introduction of new equipment into the manufacturing process or delays in the delivery of new manufacturing equipment. Lead-time for delivery of manufacturing equipment can be extensive.
We depend on products made using one technology and products using different technologies may attract customers jeopardizing our business prospects.
Our cleaning products depend on the use of licensed technology relating to sponge like products incorporating a hydrophilic (liquid absorbing) polyurethane matrix. A number of factors could limit our sales of these products, or the profitability of such sales, including competitive efforts by other manufacturers of similar products, shifts in consumer preferences or the introduction and acceptance of alternative product offerings. We have developed products using other technologies; and, thus, if our existing products or others based on the same technology fail in the marketplace, we may be able to sustain our operations or we may be forced to cease all operations.
We depend, in part, on the efforts of independent sales persons to generate sales of our products.
We do not have a sales staff devoted to generating sales of our products. Instead, we rely, in part, on the efforts of independent sales groups, who are retained on a non-exclusive basis. These independent sales persons may not devote a significant amount of time to promoting our products or may focus their efforts on other products which may result in them receiving a bigger sales commission. We have no control over these sales persons. If these sales persons are not able to generate significant sales for our products and we do not generate sales from our other efforts, we may be forced to curtail our operations and go out of business.
The marketplace may be indifferent to our products; in which case our business will fail.
Our products, as well as other technologies used, feature an internal structure which holds detergents and waxes or soap, conditioners and other components which are released only when squeezed. However, potential users may be satisfied with the cleaners, waxes and applicators they are presently using. Thus, we may expend our financial and personnel resources on design, marketing and advertising without generating concomitant revenues. If we cannot generate sufficient revenues to cover our overhead, manufacturing and operating costs, our business will fail."
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